Small firms founded at universities in Scotland saw the highest number of equity investment deals to UK spinouts last year, according to new research.

New data collected by the British Business Bank found that, of the 211 equity deals involving spinouts across the UK during 2021, 44 (21% of the total) came from Scottish academic institutions – the highest figure of any other area of Britain.

It was the second year in a row Scotland was top for equity investment deals in university spinouts after recording 64 in 2020 – ahead of the South East’s and East of England’s with 41 each.

Equity investment deals in Scottish spinouts continued a positive trajectory into the the first half of 2022, including an £8m investment in Elasmogen, a biotechnology business spun out from the University of Aberdeen, and a £1.2m investment in WellFish Diagnostics, an aquaculture spinout from the University of the West of Scotland.

Barry McCulloch, senior manager, UK Network, Scotland at the British Business Bank, commented: “Scotland is home to a number of world-class research institutions that are developing ground-breaking products and processes, particularly in sectors such as life sciences and technology.

“It’s highly encouraging to see Scottish businesses accounting for the highest proportion of equity investment deals to spinouts, with access to finance helping entrepreneurs turn research concepts into commercial ideas.

“Investing in research-led businesses is an essential part of fostering an innovation economy and the British Business Bank is committed to driving sustainable growth and prosperity across the UK, including ongoing funding for R&D-intensive businesses such as spinouts from Scottish universities.”

The latest figures follow the publication of the new study Backing innovation-led businesses: the role of public investment by the British Business Bank and UK Research and Innovation (UKRI). The report shows that spinouts from universities that have emerged from research council investments and receive funding from both the British Business Bank and Innovate UK are more likely to have better business and employment outcomes.

Of a total 2,306 spinouts associated with UKRI research grants, 331 emerged from Scottish institutions. Even with the existing strength of the equity ecosystem for Scottish spinouts, this latest research shows there is room for further growth.

Indro Mukerjee, Innovate UK’s Chief Executive, said: “As the UK’s innovation agency, Innovate UK is focused on delivering products and services to support the innovation journey and to help to make innovative businesses more investable, robust, and able to access capital for growth. So, I welcome both this report and the strong collaboration with British Business Bank.

“The report’s findings reflect my strong personal commitment to a joined-up offer to innovative businesses to better exploit the strengths of the UK’s excellent research base.”

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Scotland produces large volumes of spinout companies due to its substantial research capability. However, these companies raise less funding on average than their counterparts based in the ‘Golden Triangle’ of London, Oxford, and Cambridge, at £10m compared to £17m on average.

Professor Dame Ottoline Leyser DBE FRS, CEO, UK Research and Innovation, added: “To drive an innovation-led UK economy, we must be able to form and scale R&D intensive innovative businesses.

“This report clearly demonstrates the added value of our organisations in supporting better business outcomes. In understanding how businesses access the support we each deliver and making this process smoother and better coordinated, we will support emerging businesses better and in turn play a key role in driving an R&D intensive economy and delivering better outcomes right across the UK.”

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